Energy execs share their M&A plans, or lack thereof

June 8, 2007

Energy executives talked about their plans for M&A, or in some cases, their plans to avoid M&A, during this week’s Energy Summit.

For John Richels, President of Devon Energy, the issue is that the best opportunities may be internal, not at other oil and gas companies. “We’ve got about a 10 percent compound annual growth rate in production from now through the end of the decade … and we’ve got a lot of things that are going to carry our growth into the next decade, so when we look at other companies, frankly, we just don’t see a lot of companies that have a better opportunity base or a better growth profile than us … So there’s just not a lot of them that would make sense for us.”

Parker Drilling CEO Robert Parker also sees promising organic growth but in addition, prices that are just too high among drillers for a deal to make sense, he said. Valuations for power plants, meanwhile, are pushing Parker and power companies like Edison International to build, not buy. And independent power producer Dynegy said individual power plants have indeed become too expensive to consider. Dynegy may end up looking only at portfolios of plants or entire companies if it starts shopping around in the fourth quarter, as it hopes to do.

Power generator and pipeline operator Dominion Resources, which has nearly completed a plan to sell the vast majority of its exploration and production assets, said the only deal activity it’s planning for is perhaps the creation of some master limited partnerships for a liquefied natural gas site in Maryland and its remaining Appalachian E&P assets.

Petro-Canada also did some ruling out, saying it is not on the hunt for a refinery in the United States, preferring to stay closer to home. And once again, it plans to build, not buy. But that’s not necessarily the case for small, independent refiner Alon, which said it is looking around for the right kind of refinery to buy.

 

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